Take talk of green shoots with a pinch of weedkiller

The latest CIPS/Markit Purchasing Managers’ Index (PMI) data shows that global forces continue unremittingly to batter all UK industries, with the ailing construction industry the sick man of the economy.

Indeed, construction firms’ purchasing managers say the slight improvement in operating conditions in the past month only reaffirms how bad things have been for UK contractors. Talk of green shoots should be taken with a large pinch of weedkiller.

One reason for the optimism was that the construction PMI rose sharply from 38.1 in April to 45.9 in May. This is a massive jump and the sector is beginning to catch up with manufacturing. However positive that may be, the reality is that this sector has now performed below the neutral 50 benchmark, (that is, has been suffering severe retrenchment) for 15 straight months.

To show how severe, it is necessary to compare construction with the rest of the economy.

The construction PMI reading is now higher than the manufacturing PMI, which posted 45.4 in May, but this distracts from the fact that the sector has consistently underperformed manufacturing for months and has much further to go before it reaches its previous levels. The services sector has also fared much better than construction in the recession.

Read more at Building's Economists blog